Alberta’s Electricity Cap Removal: A brief History of Alberta’s Electricity Sector & can you save money with the rising electricity rate? Leave a comment

Imagine society without access to electricity

Power at our fingertips is quintessential to our lives today. The power that flows through our outlets creates heat and light, allows us to surf the web, commands all of our gadgets, operates businesses, and so much more. Although the major sources of energy used by commercial buildings are electricity (61%) and natural gas (32%), it’s more likely that you use a combination of both of these sources (EIA, 2012). Have you ever thought about the processes that are in place for you to receive a constant energy supply? This article focuses on power generated by electricity. Figure 1 below depicts the electricity distribution process.

Figure 1: Electricity Distribution Process (Source: Fortis Alberta, 2019)

In Alberta, the Alberta Electric System Operator (AESO) regulates the consistent supply of electricity to our homes and businesses (AESO, 2019). As the regulator, AESO ensures that there is a balance between the energy supply and demand. AESO also ensures that our electricity is generated and transmitted through reliable infrastructure, and connected to the electricity grid and power lines. This robust electricity system powers our buildings. Click here to find out more about the AESO in this video.

In Alberta, the Alberta Electric System Operator (AESO) regulates the consistent supply of electricity to our homes and businesses (AESO, 2019). As the regulator, AESO ensures that there is a balance between the energy supply and demand. AESO also ensures that our electricity is generated and transmitted through reliable infrastructure, and connected to the electricity grid and power lines. This robust electricity system powers our buildings. Click here to find out more about the AESO in this video.

But what could make your rate jump from 3c to 9c per kWh in less than a year? Or even from 5c to 9c in a single month (March-April 2018)? According to the US Energy Information Administration (2019), electricity rates fluctuate because they are dependent on quite a few factors such as the:

                         i.          Supply of fuel for electricity generation,

                        ii.          Consumer demand for electricity,

                       iii.          Price to generate fuel from energy sources e.g. coal or wind,

                        iv.          Power plant costs – construction, maintenance, operation,

                        v.          Maintenance of infrastructure e.g. power lines and poles,

                        vi.          Transmission and distribution costs e.g. distance electricity has to travel,

                      vii.          Administrative and regulations costs,

                     viii.          and many other factors.

When compounded these factors can increase prices which could mean higher rates passed on to you, the consumer. For example, you can expect higher rates when there is a high demand for electricity, a low fuel supply, less competition among retailers, recent decreases in the retailers’ incentives, subsidies or tax breaks, or recent improvements of the electricity grids and infrastructure.

Coal powers Alberta’s electricity sector – but it’s being phased out

In Alberta, power is generated predominantly by coal-fired power plants. Albertans have long relied on coal mining operations to provide us with heat and fuel to power our many industries.  However although ‘cheap’ and energy rich, it must not be forgotten that coal is a fossil fuel, a non-renewable resource that pollutes our environment – every time that it is mined and combusted, it drives the climate change crisis with the release of greenhouse gas emissions. Learn more about one perspective on the future of the coal industry here.

Canada, in a direct effort to take action on Climate Change, has decided to phase out coal-fired power as “Canada strives to have 90 per cent of electricity from non-emitting sources by 2030 and will cut carbon pollution from the electricity sector by 12.8 million tonnes(Government of Canada, 2018). Back in Alberta, this plan to phase out coal- generated electricity by 2030 was also accepted by the previous NDP government (CBC, 2019). [At this point, it is still unknown if the new Conservative government will continue on this trajectory or keep coal plants running but with more stringent emission regulations.]

Although coal power generation has decreased throughout Canada, it still remains a primary source of electricity generation in Alberta (Pembina, 2016). As of March 2019, figure 3 shows that more than 35% of Alberta’s power came from coal-fired power plants.

Figure 3: Alberta’s Electricity Power Supply (Source: AESO, 2019)

Alberta’s Electricity Cap

Alberta has had a deregulated power market or ‘energy only’ system since April 1998 where “power companies would compete for customers and government would step away from setting prices. Competition, and the introduction of contracts, was supposed to keep the prices low. The government had a 20-year-plan to bring more competition into the market, and said it would provide consumer rebates until 2020” (Edmonton Journal, 2016). This market works well for the Government of Alberta as power generators have more control over the type of electricity produced and are only paid based on the amount generated (Government of Alberta, 2019). However, consumers have complained about soaring electricity prices and demand surge blackouts which have caused the government to look further into subsidies.

The Alberta Electricity Rate Cap was a subsidy that was meant was meant to run from June 2017 until 2021 and maxed out the electricity rate paid by Albertans (residential and small businesses customers) to 6.8 cents per kilowatt hour (Government of Alberta, 2019). This last rate cap on electricity prices was introduced by the Government of Alberta to assist with movement away from coal-fired electricity and the inevitable increase associated with a transition from a ‘cheaper’ fuel source (Global News, 2016). The capped rate is only applicable to consumers who have purchased the regulated rate option.

Figure 4: Price of electricity in c/kWh with the Electricity Cap

For example, if the current rate of electricity is 3.8c/kWh, this is lower than the capped rate, so the consumer pays the actual rate of 3.8c/kWh. However, if the current rate raises to 9.1c/kWh, the price is capped at 6.8c/kWh and you, the consumer, only pay 6.8c/kWh on your bill.

The new conservative government elected in Alberta introduced a budget targeted to cut spending. In October 2019 Bill 21 was passed which eliminated the regulate rate option cap effective November 30 2019 (Government of Alberta, 2019). As the electricity price continues to soar, the burden no longer falls onto the government but is instead passed to the consumer.

How does the removal of the capped rate impact you, the commercial consumer?

This section explores the electricity bill of a small commercial building with an approximate 25,000kWh monthly usage of electricity. In figure 5, various electricity rates are compared, including a low rate (comparable to a fixed rate), the capped rate of 6.8c/kWh, the actual December 2019 rate for ENMAX and the projected January 2020 rate for EPCOR, and a hypothetical future high rate of 10c/kWh. Visit the Alberta Utilities Commission for more rates from your preferred energy suppliers.

As expected, as the electricity rate increased, the total electricity bill also increased – due to the increase in the retail charge portion of the bill. This means that your business’ monthly electricity bill, that was previously at the capped rate of 6.8c/kWh, could easily increase by hundreds of dollars month if the rate increased to 7.3c/kWh or 8.4c/kWh.

Your electricity bill could increase even higher if your total monthly electricity usage also increases (all rates in the table were calculated using a total monthly electricity usage of 25,000kWh). Furthermore, you may be an above average user of electricity if you run large power drawing appliances (e.g. specialized equipment, chest freezers, air conditioners, space heaters), leave lights on when not in use, are located in a commercial or industrial facility, or incur peak/demand charges.

 [Based on electricity consumed in a small business commercial setting. December’s lowest rate was 7.32c/kWh from ENMAX. January’s highest rate was 8.449c/kWh from EPCOR. Energy Bill categories were based on Unit Prices for all electricity bills. Admin fees and local access fees are fixed fees. Peak charges which may be applicable for some larger businesses are not shown. Source: Utilities Consumer Advocate, Cost Comparison Tool]

Here are 4 ways to save money on your electricity bill

So, what can you do? How can you minimize the effects of changing electricity rates?

1.     Stay with your current provider – But choose a fixed rate

The fixed rate may be your lowest option compared to the variable regulated rate. Compare a few contracts offered by a few providers to get the best rate and save some money. In the case study above, the lowest rate saves $200/month compared to the regulated rate.

2.     Compare rates by different providers – Switch to the provider with the lowest rate

If you’re sure that you want a variable rate, your best bet may be to change providers in search of the lowest variable rate. Get to know your options and break down the bills to their unit prices to determine the lowest variable and fixed fees. Use lower administrative fees, and competition among providers to your advantage.

3.     Switch to energy efficient appliances – To reduce your total energy usage (kWh)

Allow your appliance to work smarter so that you don’t have to. “ENERGY STAR products are independently certified to save energy without sacrificing features or functionality” (Energy Star, 2019). Consider upgrading your most commonly used and large electricity-drawing appliances such as space heaters, oven, refrigerator, dishwasher, and freezer.

4.     Do not overlook lighting – it can save you both in energy (kwh) and cost

Lighting accounts for around 17% of a small business’ electricity usage (EIA, 2012). LED bulbs use considerably less energy than standard bulbs (up to 90% less) while lasting 15x longer which results in a significant reduction in maintenance costs.

In one year, one 9W LED bulb (equivalent to 60W incandescent bulb) used for 8 hours each workday uses approximately 19kWh and can cost you about $1.29/year (at the former regulated rate of 6.8c/kWh, not including variable fees). Whereas, under the same conditions, a conventional 60W incandescent bulb uses 109kWh and costs $8.48/year. If you have 25 light bulbs in office switching to LED lights passively saves you more than $175/year. Having 200 light bulbs in your office saves more than $1,400/year. These savings are augmented in areas that are lit 24hrs a day like parkades or lit during nighttime hours like parking lots and building exteriors. Motion sensors can also be added to most application to further reduce electricity costs.

Conclusion

The convenience and accessibility of electricity has transformed our lives. However, as prices continue to climb due to external factors such as markets and governmental legislation (removal of the electricity cap), you must protect your pocket. As a consumer you can save costs by finding the best electricity rate and optimizing your usage.

What steps will you take to keep your electricity bill in check?

Thank you for Reading:

At Reliable Lighting Solutions, we’re lighting the way to healthy and productive spaces.

We put this White Paper together to help businesses understand the impact of recent changes to electricity caps, and potential cost savings opportunities (whether it’s has to do with lighting or not).

If you’ve found the information herein useful, we would love to hear about it. If you have constructive feedback on how we can improve, we’d like to hear that that too. Please submit your feedback through our contact page.

What we do:

As human beings, our relationship with light is thousands of years old. While the advent of electric light has changed our lives drastically, more than 90% of the spaces we occupy daily are improperly lit. Inadequate light sends the wrong cues to our bodies and disrupts our circadian rhythm leading to complications the scientific community is only recently able to understand.

At Reliable Lighting Solutions we use leading research and recommendations from organizations like the Harvard Medical school to create lighting solutions that give people the right light. The result of our efforts are people who are more productive, and businesses that are more profitable. Some solutions can pay for themselves in as little as 1 year.

If you’d like to learn about how we can help your business maximize the benefit of good lighting, please send us an e-mail at [email protected] or call us 1 800-918-6607

References:

1.     A guide to your bill: https://www.enmax.com/home/customer-care/billing/how-to-read-my-bill-page-2

2.     Alberta electricity system: https://www.youtube.com/watch?v=I1A1yLOTfvc

3.     Alberta government caps power prices at 6.8 cents per kilowatt hour: https://globalnews.ca/news/3081863/alberta-electricity-prices-volatility/

4.     Alberta’s Coal Phase-out: https://www.parklandinstitute.ca/albertas_coal_phaseout

5.     Alberta’s low electricity costs to shoot up in April: https://www.cbc.ca/news/canada/calgary/electricity-costs-alberta-1.4600237

6.     Bill 21: https://www.assembly.ab.ca/ISYS/LADDAR_files/docs/bills/bill/legislature_30/session_1/20190521_bill-021.pdf

7.     Calculate electricity usage: http://energyusecalculator.com/calculate_electrical_usage.htm

8.     Canada’s coal power phase-out reaches another milestone: https://www.canada.ca/en/environment-climate-change/news/2018/12/canadas-coal-power-phase-out-reaches-another-milestone.html

9.     Choosing how you buy your energy: https://ucahelps.alberta.ca/choosing-a-retailer.aspx

10. Coal phase-out plan up in the air amid election campaign: https://www.cbc.ca/news/canada/edmonton/coal-phase-out-alberta-election-1.5096497

11. Cost Comparison Tool: https://ucahelps.alberta.ca/regulated-rates.aspx

12. Current rates and terms and conditions: http://www.auc.ab.ca/Pages/current-rates-electric.aspx

13. Electric Energy Charges – January 2020: http://www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2019/25207-D01-2019.pdf

14. Electricity conservation tips: https://www.aeso.ca/aeso/electricity-in-alberta/electricity-conservation-tips/

15. Electricity Explained – Factors affecting electricity prices: https://www.eia.gov/energyexplained/electricity/prices-and-factors-affecting-prices.php

16. Electricity in Alberta: https://www.aeso.ca/aeso/electricity-in-alberta/

17. Electricity market review: https://www.alberta.ca/electricity-capacity-market.aspx

18. Electricity price cap: https://www.alberta.ca/electricity-price-cap.aspx

19. Electricity rates: https://electricity.ca/learn/future-of-electricity/electricity-rates/

20. Energy efficient products: https://www.energystar.gov/products?s=mega

21. Fossil Fuels: the Dirty Facts: https://www.nrdc.org/stories/fossil-fuels-dirty-facts

22. Here’s what you need to know about Alberta’s deregulated electricity market: https://edmontonjournal.com/business/energy/heres-what-you-need-to-know-about-albertas-deregulated-electricity-market

23. How to calculate your electric bill: https://www.directenergy.com/learning-center/energy-choice/how-to-calculate-electric-bill

24. How to Keep Your Alberta Energy Bills Under Control in 2020: https://energyrates.ca/how-to-keep-your-alberta-energy-bills-under-control/

25. Implementing Budget 2019: https://www.alberta.ca/implementing-budget-2019.aspx

26. Monthly regulated rate option rates: http://www.auc.ab.ca/Shared%20Documents/Current_RRO.pdf

27. Out with the coal, in with the new: https://www.pembina.org/reports/out-with-the-coal-in-with-the-new.pdf

28. Phasing out coal: https://www.alberta.ca/climate-coal-electricity.aspx

29. Provincial and Territorial Energy Profiles – Albertahttps://www.cer-rec.gc.ca/nrg/ntgrtd/mrkt/nrgsstmprfls/ab-eng.html

30. Regulated rate option price cap: http://www.auc.ab.ca/Pages/regulated-rate-option-price-cap.aspx

31. Regulated Rates – Year at a Glance: https://ucahelps.alberta.ca/regulated-rates.aspx

32. Removal of RRO Rate Cap program and what does this mean for you?: https://www.fortisalberta.com/blog-detail/fortisalbertablog/2019/12/12/removal-of-rro-rate-cap-program-and-what-does-this-mean-for-you

33. Residential energy rates in Alberta: what to do? March 2019 edition: http://solution105.com/residential-energy-rates-in-alberta-what-to-do-march-2019-edition/

34. The end of coal: Alberta’s coal phase-out: https://www.iisd.org/sites/default/files/publications/alberta-coal-phase-out.pdf

35. Typical utility usage: https://www.medicinehat.ca/government/departments/utility-sustainability/hat-smart/knowledge-saves-power/typical-energy-usage

36. Use of Energy Explained: Energy use in commercial buildings: https://www.eia.gov/energyexplained//use-of-energy/commercial-buildings.php

37. Why Alberta Electricity Bills are Getting Higher — and What you can do About it: https://energyrates.ca/why-alberta-electricity-bills-are-getting-higher-and-what-you-can-do-about-it/ 

38. Why coal has no future: https://www.youtube.com/watch?v=_7XlEjTgo6U

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